Buy Essay Theory of a perfectly competitive labor market
In a perfectly competitive labor market, employers compete to recruit many laborers possessing similar training and skills. The behavior of both the employees and the employers is determined by wages, which is an independent factor. Both parties are also assumed to possess information on fluctuations in labor supply and demand at no price.
In a labor demand and supply model, labor supply curve represents the cost the workers will forego to work at a specific wage rate. A rise in the wage rate will result to workers giving up time spent on leisure in order to increase the work hours. However, for specific individuals, an increase in wage rate will cause a decrease in the hours they are willing to work. On the other hand, in a labor demand graph, the height represents the revenue gain on the side of the employer and the society upon hiring an extra unit of labor.
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